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By Ryan Prete
Treasury Secretary Steven Mnuchin’s remarks on taxing remote retailers have raised questions but few answers among state practitioners.
During a July 26 hearing before the Senate Appropriations Subcommittee on Financial Services and General Government hearing, Mnuchin said that online sales taxation “is an issue that we’ve been looking at very carefully within the administration, and we expect to come out with a position shortly.”
“The Treasury Secretary did recognize at yesterday’s hearing that the states receiving money in one format or another was very important, implying that support for one of the several remote seller bills that impose collection and remittance requirements and provide additional revenue to the states could be forthcoming,” Jamie Yesnowitz, state and local tax practice and National Tax Office leader for Grant Thornton LLP, told Bloomberg BNA in a July 27 email.
Mnuchin’s comments come at a time when states are adopting aggressive measures to manage or overturn the U.S. Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, which prohibits states from imposing sales and use tax collection obligations on vendors that don’t have a physical presence in-state. Three bills proposing a federal solution are pending before Congress—two measures would expand states’ taxing authority over remote retailers, while one measure would curb states’ ability to tax out-of-state sellers.
“There’s an awful lot of money that’s not being collected that is due to them under a use tax, and this could be of very important means for states to fund infrastructure, which is critical,” Mnuchin told the appropriations subcommittee.
However, President Donald Trump’s potential stance on online sales taxation is unclear from Mnuchin’s comments.
“I’m not sure if Mnuchin personally holds a stance on the collection of online sales tax, or if he was just echoing the administration’s push for an infrastructure plan,” Max Behlke, director of budget and tax at the National Conference of State Legislatures, told Bloomberg BNA July 27 during the Advanced State and Local Tax Institute at Georgetown University Law Center.
Mnuchin further said that he was “encouraged that Amazon is now charging tax, I believe, on their own sales but not the marketplace.” However, he added that he’s “not sure I understand the consistency on that.”
Mnuchin’s comments on Amazon.com Inc. followed a July 24 tweet from Trump questioning whether the e-commerce giant is running a “no-tax monopoly.”
“One could interpret the President’s tweets referencing Amazon in a negative fashion in at least a couple of different ways,” Yesnowitz said. “The tweets could be interpreted as a desire to require Amazon and all other remote sellers to collect and remit under one of the several remote seller bills, based on the assumption that Amazon does not currently collect or remit sales tax to the states.”
However, Yesnowitz explained that the assumption that Amazon doesn’t collect sales tax is inaccurate.
Amazon collects and remits sales taxes in all 45 states with a sales tax and the District of Columbia, according to the company’s website. As of April 1, the retail behemoth had agreed to collect in each state that imposes sales or use tax collection obligations. However, Amazon doesn’t collect tax on third-party sales facilitated through its marketplace platform.
Behlke said during a keynote address at the Georgetown event that he expects states will follow in the footsteps of Minnesota and Washington—the first states to enact laws requiring marketplace providers such as Amazon, eBay Inc., and Etsy Inc. to collect tax on third-party marketplace transactions. Both laws passed this year, but many practitioners predict they will trigger legal challenges.
A House Judiciary subcommittee took up federal legislation that would restrict states form taxing out-of-state sellers one day prior to Mnuchin’s comments on online sales tax.
The Subcommittee on Regulatory Reform, Commercial and Antitrust Law heard testimony on Rep. Jim Sensenbrenner’s (R-Wis.) No Regulation Without Representation Act of 2017 (H.R. 2887), which would in part codify the Quill physical presence rule.
“Trump’s tweets could be interpreted as an implicit endorsement of the Sensenbrenner bill which would keep the physical presence rule, perhaps in part because the bill represents a policy that Amazon no longer explicitly supports,” Yesnowitz said.
A hearing hasn’t been held on competing measures: the Remote Transactions Parity Act of 2017 (H.R. 2193), which would allow states to mandate out-of-state sellers and online vendors collect tax on in-state sales, and the Marketplace Fairness Act of 2017 (S. 976) which would also expand states’ taxing authority over remote retailers.
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